BERLIN, Sept 4 (Reuters) - For all Angela Merkel's
headline-grabbing "green revolution", Germany's image as a world
leader on environmental policies is in danger of falling under
the shadow of the smoke stack and a cloud of exhaust fumes.

Increasing dependence on brown coal has raised doubts about
whether Berlin will hit its medium-term CO2 emission goals. And
though EU regulations have helped bring down vehicle emissions,
critics denounce the political reluctance to confront Germans'
passion for big, fast cars.

Having led the pack on emission reductions thanks in part to
a rapid expansion in power generation from the sun, wind and
other green sources, Germany is now slipping behind, with CO2
emissions rising for the second straight year in 2013 in
Europe's biggest economy.

Just seven years ago the media dubbed Merkel "climate
chancellor" for convincing Group of Eight leaders, including
then U.S President George W. Bush, to consider cutting
greenhouse gas emissions by 50 percent by 2050.

Ambitious then, it looks even more so now, especially as the
Ukraine crisis pushes energy security up the agenda.

"In 2007, it was a bit simplistic. People thought it would
be an easy ride," said Christian Egenhofer, head of the energy
unit at the Brussels-based Centre for European Policy Studies.

"The (green) philosophy holds, but domestically things have
become more difficult and more cautious," he said, adding global
constraints, such as a lack of a comprehensive deal at the 2009
Copenhagen climate conference, had made things more difficult.

After failure in Copenhagen, almost 200 nations are aiming
to agree a U.N. deal to fight climate change at a summit in
Paris in late 2015. With many nations still focused on reviving
economic growth, achieving a binding treaty is expected to prove
elusive.

The "Energiewende", or switch to renewable energy away from
nuclear and fossil fuels, is the centrepiece of Merkel's energy
and environment policy. It is a bold experiment for Europe's
industrial powerhouse that other countries might follow - if
successful.

Since 2000, when green energy incentives were introduced by
a Social Democrat and Greens coalition, Germany's renewables
sector has boomed. It accounted for 23.4 percent of power
generated in Germany in 2013, up from 6.2 percent in 2000.

Merkel made the policy her own after the 2011 meltdown at
Japan's Fukushima reactor by speeding up the nuclear phaseout.
But she has drawn criticism for shielding industry from bearing
more of the cost of the subsidies for green energy, which have
pushed up retail power prices.

COAL V GOAL

Much concern is focused on Germany's reliance on brown coal,
which harms the environment more than other types of coal, for a
secure and affordable power supply. Last year lignite was the
single biggest source of German power, generating 25.8 percent,
and it has risen every year since 2010.

Greenpeace says no other country in the world extracts and
converts as much brown coal into electricity as Germany.

"Germany is making itself a laughing stock because it hasn't
set limits on brown coal," said Greenpeace's Karsten Smid, who
wants the government to say when it will phase it out.

Coal-fired power plants, responsible for about a third of
Germany's CO2 emissions, are also hitting climate change goals.

"Failure to reduce the persistently high level of coal-fired
power generation threatens Germany's climate targets .. and
undermines a sustainable energy transition," said a report
co-authored by energy economist Claudia Kemfert at Berlin's DIW.

The environment ministry has already warned Germany may miss
its goal to cut greenhouse gas emissions by 40 percent by 2020
from 1990 unless it steps up its efforts. Having achieved a 25
percent fall by 2012, it is now on track to miss the target by
seven percentage points.

Germany's goals may be more ambitious than the EU's 20
percent aim, but rapid cuts in the early years were achieved
relatively easily by overhauling Communist-era factories in
eastern Germany. Last year, Germany emitted 951 million tonnes
of greenhouse gases, up 1.2 percent from 2012.

Merkel has shown leadership in some areas, such as promising
$1 billion - far more than any other donor so far - to a Green
Climate Fund to help developing nations tackle global warming,
but media have widely accused her of neglecting the issue.

Pressed last week, she vowed to focus on it next year in
Germany's G7 presidency but gave no clues on policies, such as
boosting gas usage.

POWER PLAY

Germany's mighty car sector is another problem, say critics.

Though smaller cars are growing popular elsewhere,
especially in the key export market of China, they aren't
catching on in Germany.

According to an International Council on Clean
Transportation (ICCT) report, Germany has seen the
second-biggest increase in passenger car mass in the EU over the
last decade after Sweden, and German drivers take to the wheel
with 13.4 percent more power in their pedal than the average
European.

"Big cars are part of the national psyche. For that reason,
politicians are reluctant to intervene strongly on more
fuel-efficient vehicles," said one industry expert, speaking on
condition of anonymity.

They are also reluctant to interfere with a sector that
packs such an economic punch, employing 760,000 people and
exporting more than 4 million vehicles a year - and donates
hundreds of thousands of euros to the main political parties.

Last year Merkel intervened to soften EU plans to improve
new car fuel economy. The new plans are still the toughest in
the world, but manufacturers won an extra year to reach emission
limits of 95 grams of CO2 per kilometre (g/km) for an average
car.

Germany cut its average new car emissions by 24 percent
between 2001 and 2013, but still emitted 136 g/km of CO2 per car
last year, above the EU average of 127 g/km, according to
figures from lobby group Transport & Environment (T&E), based on
European Environment Agency data.

T&E's Greg Archer wants Germany to introduce a system where
car taxes rise more sharply with emissions.

In Germany, the difference in tax between the highest and
lowest bracket is 92 euros over four years compared with more
than 12,000 euros in the Netherlands, he says. That means tax on
a vehicle emitting 140 g/km in the Netherlands is more than
three times higher than in Germany.

Another problem is Germany's fuel efficiency labelling,
which helps marketing. Critics say it is misleading as it groups
cars of similar engine size rather than emissions. This means a
Porsche Cayenne with emissions of 191 g/km has the same
efficiency label as a Citroen C3 emitting 114 g/km, says T&E.

Germany is also a laggard on electric cars and is widely
expected to miss a target of selling 1 million by the end of the
decade. Last year, electric cars accounted for about 0.2 percent
of new car sales, compared with an EU average of 0.4 percent and
0.9 percent in the United States, says T&E.

The VDA carmakers' association points to fuel economy
improvements as proof that firms are taking environmental
concerns seriously. It also says German carmakers have developed
the technology but politicians have to help create conditions
for electric cars to sell.

But they also have to be conscious that the wider world is
changing, as other countries - even China - follow Europe's lead
on strict environmental standards, and hybrid technology becomes
more popular in Asia and the United States.

"They sell large premium vehicles globally. That's where
they make money, and the trend to more efficient vehicles is a
big challenge in terms of their business strategy," said Archer.
(Reporting by Madeline Chambers; Editing by Stephen Brown and
Will Waterman)